Sanofi's ($SNY) lawyers must be watching PR Newswire with their fingers crossed. A handful of hopeful law firms are scouting for lead plaintiffs in shareholder lawsuits against the French drugmaker, citing a string of bad news during the second half of last year.
The centerpiece is not CEO Chris Viehbacher's sudden ouster, which would be the most dramatic of those events. Rather, the claims focus on an alleged marketing strategy--an illegal one, to be exact.
Soon after Viehbacher left, a former employee sued for wrongful termination. But the real news in Diane Ponte's lawsuit was an alleged kickback scheme, allegedly designed to boost sales of the company's diabetes drugs. As a paralegal at the company, Ponte had reviewed contracts with two consulting firms, and she alleges that tens of millions in kickbacks were engineered through those consulting relationships. The lawsuit names not only Sanofi, but Viehbacher himself, along with a former diabetes executive.
Sanofi and its ex-CEO both denied the allegations. "Diane Ponte is a disgruntled former employee who is opportunistically attacking our company," Sanofi said in a statement at the time. "Ponte filed for violations of New Jersey state employment law, specifically the New Jersey Conscientious Employee Protection Act (CEPA). The employment law allegations are without merit, and Sanofi will vigorously defend the suit. We take this matter very seriously and will protect our company and our reputation."
Now, the plaintiffs' lawyers are trying to parlay those accusations--along with Viehbacher's dismissal--into shareholder actions against the company. Sanofi shares did take a dive during those weeks in late October, and the putative suits would be based on shareholder losses from that decline.
It's common for lawyers to go fishing for shareholder lawsuits after notable declines in share price. Not so common, however, for those suits to be predicated on another lawsuit filed by a whistleblower. More often, it's a case of big bad news tanking a stock, and who knew what and when, and whether they shared enough of that knowledge with shareholders. For instance, Hospira ($HSP) last year settled a shareholder suit for $60 million, after quality problems at a key plant took a bite out of its share price.
The law firms itching to fight Sanofi are sending out press releases regularly, reminding investors of a Feb. 2 deadline to join up with the lawsuit. One firm says it's looking for applicants for a lead plaintiff. We'll have to wait till then to find out whether they succeed.
- read one law firm's press release
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